Last month, the superstorm Sandy crippled the New York City region. With swathes of its electrical grid offline, much of the area’s transportation system was hobbled, business was disrupted, and many basic relief efforts were slowed. Last month’s issue also featured work from Garrett van Ryzin and Klaus Lackner on how, thanks to advances in technology, a number of industries are poised to turn away from large, centralized infrastructure to small, modular infrastructure. Ideas at Work asked van Ryzin and Lackner to share their expertise on how taking a similar approach with power supply could grant households and businesses a measure of independence from the grid and guard against widespread power failures.

Among the many questions provoked by Sandy, one of the most pressing is, what could a more resilient electrical grid look like? In our view, a resilient grid would be a smart grid. What would a smart grid look like? It would be a two-way grid that would decentralize power delivery to the end consumer.

The electrical grid was never designed to be a flexible network that allows people to take electricity out and put electricity back in — it was designed as a centralized utility that distributes outward. But opportunities arise from this fact. While these opportunities present no small challenge, the technological hurdles are not as great as the regulatory hurdles.

On the technological front, there’s plenty of room for more innovation, but the pieces already exist. We already have the beginnings of a decentralized grid: after Sandy, we saw people pull out generators to produce power off their natural gas lines. There are any number of existing power conversion tools and makeshifts people could and did use to the same end, such as using solar panels off their roofs or gas from cars. A smart grid would allow individual households to switch between sources — grid, generator, solar, and so forth — seamlessly.

And that requires a design shift. On the first night of the storm, a colleague’s generator failed, not because of the storm itself, but because a voltage spike blasted into his home while he was on the generator. Power companies don’t want customers using generators as our colleague was, for fear consumers will create hazards outside their homes. Obviously, this may work the other way around as well.

One solution: a box at the entry to the home that allows consumers to use the power company just as they would an appliance. Rather than letting the utility company into a toaster, a consumer can stop it at the door if she has an internal power supply from her solar panel or generator or even her hybrid car parked in the garage. Is additional external power needed? Flip the switch on. No additional external power needed? Switch it off. Is the internal power supply producing more electricity than needed at the moment? Flip the switch that puts (and sells) electricity back into the grid. We could build a “handshake” into the system — the household and the utility would have a reciprocal option to accept or refuse electricity. Once we have built in that break, various other options emerge.

Provided, of course, the utility lets us. One acute example of the regulatory hurdles: utility companies tell us that smart meters that can reflect real-time power use are very expensive compared to monthly metering. Yet anyone can buy 20 dollars worth of parts at RadioShack and do it himself. These meters may not be tamperproof — yet. If the will were there, the technology is close at hand.

Today’s technology also makes it possible for households to switch between power sources in microseconds: the utility delivers power to the house, the consumer takes it from there. This could be a one-way switch in which power comes in on this line but cannot leave accidentally. Inside the house the consumer switches between the different supplies, stays within their budget with the power company, and can switch in alternative sources or storage and so forth. That isolates the house from the grid, thereby removing the complaint the power company rightly has that households might create a hazard by sending uncontrollable electricity back into the grid. An underwriter could guarantee that such a device will never send power back into the grid unless the power company explicitly asks for it. It then may soon be possible for households to insulate themselves from the grid entirely — not only could power come from solar panels on the roof or, in an emergency, from a generator — but households could store energy in the house — which would build in quite a bit of redundancy.

Households would be far less dependent on the reliability of the utility company to the point where if the grid went down every day for an hour we’d hardly notice because our internal power sources would balance it out. (One of us went without power for more than a week recently, not because of Irene or Sandy but because a tree knocked out power lines in a run-of-the-mill thunderstorm.)

The ability to choose power sources would not just benefit homes, but businesses too. While large firms that have large demand are likely to have their own power plant on site and don’t depend on the grid, those that don’t lose money when the grid fails. The cost-benefit analysis for mid-size and even smaller firms may start looking more attractive if the power starts going out every two weeks. The recent experience many of us in northeast have had, stranded for weeks without power, may give households the incentives to embrace makeshift alternative power sources.

As consumers increasingly face new choices as a result of technological innovations on the energy delivery front, we can gradually achieve a decentralized grid and a measure of independence from it. Utilities also face a choice: continue their apparent decline in reliability, with a commensurate decline in relevance, or adapt and deliver on the promise of a smarter grid.

Klaus Lackner is the Maurice Ewing and J. Lamar Worzel Professor of Geophysics, department chair of Earth and Environmental Engineering, and director of the Lenfest Center for Sustainable Energy at the Earth Institute at Columbia University.

Garrett van Ryzin is the Paul M. Montrone Professor of Private Enterprise, chair of the Decision, Risk, and Operations Division, and faculty director of the Master Class Program at Columbia Business School.

Garrett van Ryzin is the Paul M. Montrone Professor of Decision, Risk, and Operations at the Columbia University Graduate School of Business and Chair of the Decision, Risk, and Operations Division of the School. His research interests include analytical pricing, stochastic modeling, and operations management. He is coauthor of the book The Theory and Practice of Revenue Management, which won the 2005 Lanchester prize...

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